Your pension plays an important role in your retirement. So, it’s natural to worry about if you’re making the right decisions. If you do, research suggests you’re not alone.
Just 44% of UK adults are confident choosing and managing their personal pension, according to a report from the Financial Services Compensation Scheme (FSCS). Having confidence about the financial decisions you make doesn’t just ease your mind now, it could mean you’re in a better position in the future too.
Pensions can seem complex, and you may put off engaging with them because of this. But the sooner you start managing your pension, the better – it could help you get more out of your retirement savings.
So, if you’ve been neglecting your pension, here are some of the things you need to know that could help you feel more confident taking control of your retirement savings.
1. Your pension is usually invested to deliver long-term growth
In most cases, your pension savings will be invested. If you’re new to investing, it can seem complicated. However, by investing your savings, your contributions could grow further.
All investments carry some level of risk and are likely to experience volatility at times, including falling in value. Yet, over the long term, these bumps typically smooth out to deliver growth.
As you’ll usually be investing in a pension for decades, it could help you make the most of your money. It can make a significant difference to the size of your pension at retirement and the lifestyle it will provide you with.
2. Your pension will typically be invested through a fund
While your pension is usually invested, that doesn’t mean you’ll have to make day-to-day decisions. Often, retirement savings are invested through a fund.
A fund will pool your money with that of other investors. This money is then invested in a range of stocks, shares, bonds and other opportunities.
This helps to spread risk and means you don’t need to make lots of decisions about how to invest your retirement savings, or how to respond to events outside of your control, such as high inflation or economic uncertainty.
However, you will need to choose a fund to invest through. Funds will have different risk profiles and goals, so you’re able to choose one that suits your needs.
Usually, a pension provider will offer several funds for you to choose from. If you haven’t selected a fund, it’s likely your savings are invested through the default option.
For confident and experienced investors, there are pension options that allow you to have more control over how your contributions are invested. However, these aren’t suitable for most pension savers. If you’d like to discuss this option, please contact us.
3. The FSCS provides protection against a pension scheme failing
Only 4 in 10 people are aware that the FSCS protects your pension as well as your current and savings accounts, and it can provide peace of mind.
Savers that are aware of the protection the FSCS offers were more likely to say they are confident choosing and managing their pension.
If your pension provider fails, you can receive 100% of the money that was lost through an FSCS claim, and there is no upper limit. So, if you’re worried about saving through a pension in case a provider fails, the FSCS can give you the confidence to start putting money away for your retirement.
It’s important to note that the FSCS doesn’t cover investment performance. So, if your pension doesn’t deliver the returns expected or the value falls, you would not receive compensation.
4. Tailored advice can help you get to grips with your pension
You don’t have to make pension and retirement decisions alone. Advice that’s tailored to you can help you feel more confident about the future.
Whether you want to understand which fund suits your risk profile as you start saving for your future, or you are nearing retirement and need to decide how to access your pension, we’re here to help. Working with us means we’re here to answer your questions and it could help your money go further.
If you’d like to speak to us, please get in touch to arrange a meeting.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Your pension income could also be affected by the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.